I INTRODUCTION

The concept of franchising made its way to the then Czechoslovakia soon after 1989 when the fall of communism brought about the necessary political and economic changes. The opening of the Czech market to both domestic and international businesses led to the establishment of the first franchises, including the fast-food chain McDonald’s (1991), the cosmetics shop Yves Rocher (1991) and the DIY retailer OBI (1995).

In 1993 the Czech Franchise Association (CFA), a non-profit professional organisation whose current 60 members include franchisors and various franchising specialists, lawyers and advisers, was established. The CFA is a member of the European Franchise Federation and the World Franchise Council.

Widespread expansion of the franchising model was, however, rather slow during the 1990s because of a variety of factors, including difficulty of access to external funding for small entrepreneurs, an underdeveloped legal system and foreign franchisors or investors’ limited knowledge of the Central and Eastern Europe (CEE) markets, as well as Czech small to medium-sized businesses’ lack of experience of international trade. This started changing around the time of the Czech Republic’s accession to the European Union, in 2004, and after. This political development at the EU level contributed to the creation of a favourable environment for franchising, which has since progressed rapidly. Today, franchising is seen as a common business model with approximately 250 franchises being present on the Czech market. In 2014 there were 5,272 franchisees in the Czech Republic operating 6,432 own branches and 6,364 franchise outlets, which represents almost a doubling of the situation in 2010.2 While in the past there was a clear predominance of imported foreign concepts entering the Czech market through franchising, since 2011 franchising concepts originating in the Czech Republic have been in the majority. Among the most successful Czech brands are Husky and Bushman (both outdoor clothes), Benu and Teta (pharmacy and retail) and Fruitisimo and Bageterie Boulevard (both food).

The community of franchising professionals has also been growing. In 2006, the Czech Franchise Institute (which runs the Franchise Club) was established and, three years later, joined the International Franchise Association. The membership currently numbers around 100, making it the largest local franchising body. Other notable developments in the country include the publishing of an annual franchising report, since 2010, and since 2012 a dedicated quarterly magazine, Vlastní firma FRANCHISING.

II MARKET ENTRY

i Restrictions

In general, there are no restrictions or approvals required in connection with foreign franchisors entering the local market. Obviously, there are some highly regulated sectors, such as defence, telecoms and gambling, but there are no limitations imposed specifically in connection with franchising.

Foreign entities that carry out business activities in the Czech Republic on a regular basis might need to set up a local establishment, whether in the form of a local subsidiary or a branch of the foreign entity, and must comply with the same rules that are applicable to domestic entities, such as acquiring the relevant trade licence and registering in the Commercial Register (although with respect to EU-based entities the latter requirement is disputed among legal commentators). Assessment of this requirement and ensuing obligations should ideally be made on a case-by-case basis and reflect the particular franchising model in question.

There are no general restrictions on a foreign entity granting a master franchise or development rights to a local entity. The terms of the respective agreements must, however, comply with the provisions of competition law.

There are no restrictions on foreign franchisors owning equity in a local business either.

ii Foreign exchange and tax

As far as foreign exchange is concerned, foreign persons (non-residents) can hold bank accounts in any currency and there are no restrictions placed on the import or export of capital. Repatriation payments can be made in any currency.

In general, the Czech tax system has been rather infamous for its complexity and for being rather burdensome for businesses. That said, most aspects of the local tax systems (including mutual assistance and administrative cooperation) stem from EU law. The main taxes include income tax, value added tax, real property tax, road tax (imposed on entities that use vehicles), excise duties and social security. The Czech Republic is party to over 90 double-taxation treaties. As far as withholding tax on royalties paid to non-residents is concerned, the standard rate is 15 per cent but can be 35 per cent if income is paid to a ‘tax haven’. These rates can, however, be reduced under either a tax treaty or an exemption granted under the applicable EU legislation. Taxpayers from other EU or EEA countries may file a tax return at year end and deduct expenses related to royalty payments. From 2014, the Czech Republic and the United States cooperate on enforcement of tax duties under the terms of the US Foreign Account Tax Compliance Act.

III INTELLECTUAL PROPERTY

i Brand search

The Czech Industrial Property Office (IPO CZ) keeps a database of trademarks and other intellectual property rights valid on the territory of the Czech Republic, whether national trademarks, European Union trademarks or international registrations. The database is available online (at www.upv.cz) and is a very useful tool for searching protected trademarks, similar brands and other intellectual property rights that may be relevant for franchises. The IPO CZ conducts research as part of its paid services, but it is perhaps more common to use the services of specialised law firms or trademark attorneys. The main reason for this is that searches should not be limited to the databases maintained by the IPO CZ. For unregistered brands, business names and the like, it is usually necessary to search in the relevant databases of legal entities (especially the Commercial Register), search among registered domain names, or simply carry out research on the internet. For some rights that may also be relevant, such as image rights, no research can be conclusive because copyright is an unregistered right in the Czech Republic. The results of searches should always be discussed with specialists who can carry out a risk assessment and provide advice on the best way forward.

ii Brand protection

Brand protection is typically obtained via registration of the relevant brand as a trademark by the IPO CZ or as a European Union trademark by the European Union Intellectual Property Office. Although Czech law contains tools to achieve protection of non-registered signs, it is always a good idea to rely on registered rights. Trademarks are defined by Section 1 of the Trademark Act No. 441/2003 Coll. (the Trademark Act) as any signs capable of graphic representation, in particular words, colours, drawings, letters, numbers or shape of a product or its packaging, provided that such a sign can distinguish goods and services of one entrepreneur from those of another. Upon receipt of the application, IPO CZ carries out a formal search to ascertain that the application meets all the requirements prescribed by law, as well as a substantive search to find out whether the sign concerned is eligible for registration as a trademark. In the event that the IPO CZ finds no legal obstacles to registration of the trademark, it publishes the application in its regular Bulletin; third parties can oppose the registration within three months of publication. When a trademark is successfully registered, it is protected for 10 years from the priority date, which is usually the date when the application was submitted. This period can be repeatedly extended by an additional 10 years, subject to payment of an administrative fee.

Protection is also granted to designs provided they are new and have an individual character. Applications for registration of Czech national industrial designs must be submitted to the IPO CZ and they are then subject to substantive examination (in contrast to the registration procedure applicable to registered Community Designs, where there is only formal review of the application). When a design is registered, the protection lasts for five years but can be repeatedly renewed up to a total of 25 years.

iii Enforcement

According to the Trademark Act, the owner of a trademark has the exclusive right to use the trademark in connection with goods or services for which the trademark is registered. The term ‘use’ is defined in a rather broad manner and includes: (1) use of the trademark on the goods or on their packaging; (2) offering goods under the trademark, putting them on the market or storing them for such a purpose or offering or providing services under the trademark; (3) exporting or importing goods under the trademark; and (4) using the trademark in business correspondence and advertising.

According to the Industrial Designs Act (No. 207/2000 Coll.), the registration of an industrial design gives its owner the exclusive right to use the industrial design, to prevent third persons from using it without his or her consent, to grant consent to use the industrial design to third parties or to transfer the right to the industrial design.

Intellectual property rights are typically enforced via courts. The relevant rights and claims that are available in cases of intellectual property rights infringement are (with the exception of copyright, which has a separate regulation) all concentrated in the Act No. 221/2006 Coll. on Enforcement of Industrial Property Rights (the IP Enforcement Act). The IP Enforcement Act gives the IP owner the right to request that the infringer refrains from the activity that infringes or endangers the rights concerned, and that the consequences of the endangering or infringement be removed, namely by recalling or permanently removing goods and by recalling, permanently removing, or destroying tools or devices determined or used in connection with the activities that infringe or endanger this right. The IP owner can also request information about the origins of the infringing goods and their distribution channels. Regarding monetary claims, the rights holders can claim damages (they can choose whether to claim actual damages and lost profits, if applicable, or the amount calculated as double the standard market licence fee), surrender of unjust enrichment or, in cases of non-monetary harm, reasonable satisfaction, which can take the form of anything from an apology to financial compensation.

Simultaneously with enforcement of intellectual property rights, it is also fairly common in practice to make unfair competition claims. Examples of the activities that are explicitly listed among the types of unfair competition behaviour include misleading advertising, misleading marking of goods and services, and causing risk of confusion and parasitism on reputation, all of which can be especially relevant for franchising. This can be particularly useful for protection against various lookalikes and imitations, where the traditional intellectual property rights may not, for various reasons, provide sufficient protection.

iv Data protection, cybercrime, social media and e-commerce

The Czech Republic has a relatively long tradition of protection of personal data. The first data protection law was adopted in 1992 and the current legislation, Act No. 101/2000 Coll. (the Data Protection Act), is fully harmonised with the EU Data Protection Directive. Among the EU countries, the Czech Republic is sometimes considered to be a country with a strict interpretation of the law regarding personal data protection. However, the Czech Office for Protection of Personal Data (UOOU) does not impose stringent fines or other sanctions on private businesses very often.

Any entity that collects, stores and processes personal data in the Czech Republic must comply with a set of obligations that include the following: data must only be processed with the consent of the data subject, unless a statutory exemption applies; data must only be processed for the stated particular purpose and only for as long as is absolutely necessary; organisational and technical measures must be adopted to ensure the security of the data; the data subject must be provided with all the required information; and the processing of personal data must usually be notified to the UOOU via a simple online form. Any cooperation between a data controller and a data processor must be based on a written data processing agreement, which must have certain contents as stipulated by law. Transfers of personal data outside the EU can occur only with the prior consent of the UOOU, unless made to countries specifically approved by the decision of the European Commission or unless the EU standard contractual clauses are in place. Transfer of personal data to the United States is currently available to the companies registered and compliant with rules of the ‘Privacy Shield’ agreement, which replaced the previously invalidated ‘Safe Harbor’ regime. Generally, the UOOU does not handle many applications for consent to cross-border transfers of data because businesses tend to take the other available options. Multinational groups of companies, including franchising structures, can additionally use binding corporate rules, which ease the transfer of personal data within the group but require a considerable amount of consultation with the relevant data protection authorities.

Many medium-sized to large businesses have also started to prepare for the EU-wide General Data Protection Regulation No. 2016/697 (GDPR). The GDPR will come into force in 2018 and will eventually replace national laws, including the Czech Data Protection Act. The GDPR further tightens the rules for processing of personal data, as well as imposing severe sanctions for non-compliance.

Cybercrime is explicitly addressed by the Czech Criminal Code (Act No. 40/2009 Coll.), which provides modern criminal law protection for IT systems and data. The criminal offences include unauthorised access to IT systems and information media (hacking), unauthorised use of data and obtaining technology to violate the secrecy of messages, etc. Furthermore, the Czech Republic was one of the first European countries to take the measure of adopting a Cybersecurity Act (Act No. 181/2014 Coll.). The Cybersecurity Act imposes duties on telecommunication providers or providers of critical infrastructure (e.g., in banking and the defence sector), consequently it is not likely to burden typical franchise businesses. Its purpose is to make the online environment safer. This may serve primarily to benefit digital franchises. The Czech Republic has adopted the EU Directive on Security of Network and Information Systems, known as the NIS Directive, which will slightly extend the number of subjects affected, and will harmonise the rules with the rest of the EU.

Legal regulation of e-commerce is rather complex and spreads across various laws including the Civil Code (No. 89/2012 Coll.), the Electronic Communications Act (No. 127/2005 Coll.), the Consumer Protection Act (No. 634/1992 Coll.), the Data Protection Act, the Criminal Code and the Information Society Services Act (No. 480/2004 Coll.). The latter is especially relevant not only because it contains rules on the liability of internet service providers, but also for its regulation of email marketing (and spam). Similarly, a wide range of rules apply to social media. Franchises must cope with many individual laws governing personal data protection, personality and privacy rights, intellectual property, consumer protection and advertising regulations. Rather than focusing on social media, these laws regulate on a general level.

IV FRANCHISE LAW

i Legislation

In the Czech Republic, there is no legislation dedicated specifically to franchising. However, this absence of franchising legislation is perhaps not unusual, and definitely not a barrier to the development of franchise systems. Franchise arrangements are typically governed by civil law (as far as the actual contract or establishment of the business is concerned) but other areas, including public law (e.g., competition regulation, employment, trade licences and tax), can play an important role. Therefore, it is really a mixture of laws that are relevant in connection with the franchising industry.

A franchise agreement as such would be considered an innominate agreement (meaning a type of contract not specifically provided for in law) pursuant to Section 1746(2) of the Civil Code. The Civil Code is one of the most important pillars of Czech private law. Several years ago, the Civil Code was fully recodified, focusing on, among other things, the extension of contractual flexibility and freedom. Even though the current Civil Code is now in its third year of effect, it will still take time before the courts establish the necessary case law to bridge a few interpretation gaps and provide sufficient guidance to parties affected. A typical franchise contract would include elements of a sale contract, lease contract, licensing agreement, consignment contract and trade secrets, etc., which are all expressly regulated by the Civil Code. That, in turn, needs to be reflected when drafting a franchising agreement.

The European Code of Ethics for Franchising is not binding legislation in the Czech Republic; however, it seems to have certain persuasive power and tends to be relied on by entities involved in the cross-border franchising business.

ii Pre-contractual disclosure

The Civil Code brought into Czech law the concept of pre-contractual liability (culpa in contrahendo), which involves an element of disclosure obligation. Sections 1728 and 1729 of the Civil Code set out the following general rules:

  • a parties are entitled to hold talks freely and they are not liable when the contract is not concluded unless the other party starts or continues negotiations without the intention of concluding the contract;
  • b during the contract negotiations, parties should inform each other about all factual and legal circumstances to allow the other party to determine the possibility of concluding a valid agreement, and be clear about the other party’s interest in making the contract;
  • c if during the negotiations the parties reach the point where the conclusion of the agreement appears to be highly likely, the party who, despite the other party’s reasonable expectations, terminates the negotiations without justified reason is deemed to have acted unfairly; and
  • d the party that acts unfairly is liable for damages up to the maximum amount corresponding to the loss from non-concluded contracts in similar cases.

Other than this, there are no pre-contractual disclosure obligations specifically relating to franchising under Czech law. Also, the above rules are fairly general, broad and new, hence no proper judicial guidance is available yet. There are no special provisions regarding formal requirements for pre-contractual information concerning franchise agreements.

iii Registration

There are no specific registration requirements for franchises and no franchise register exists in the Czech Republic. Nevertheless, some general registration requirements apply; for example, relating to the setting up of a business in the Czech Republic (e.g., the trade licences register, registration of a legal entity in the Commercial Register and tax-related obligations).

iv Mandatory clauses

There are no mandatory clauses applicable to franchise contracts. In principle, parties can determine the terms and conditions of their contract freely provided that their contract does not infringe good morals (bonos mores), public order or protection of personality status or rights.

Despite the fact that the European Code of Ethics for Franchising is not legally binding, members of national associations and federations of the European Franchise Federation (like CFA) undertake to respect the Code’s principles and often incorporate these principles into provisions of franchise agreements or attach their national annex to an agreement.

v Guarantees and protection

A franchisor may request guarantees and protection under civil law. According to the Civil Code there are several options for guarantees, such as suretyship, financial guarantees, collateral transfer of rights, liens, bank guarantees, contractual penalties, etc. Guarantees that are in compliance with the law are enforceable.

V TAX

i Franchisor tax liabilities

Regarding Czech tax non-residents, a withholding tax of 15 per cent applies to licence fees paid by Czech tax residents to Czech tax non-residents. Double taxation treaties and EU legislation may reduce the statutory withholding tax rates to 5–10 per cent. Under certain conditions the licence fees paid to related party recipients in the EU, Switzerland, Norway or Iceland are exempt.

Czech tax residents are considered to be entities with their registered office or place of effective management in the Czech Republic. Income from the worldwide operations of Czech tax residents is subject to general corporate income tax. The corporate income tax rate applicable in 2017 is 19 per cent.

The licence fees received from a foreign entity without a permanent establishment in the Czech Republic shall be subject to general corporate income tax and, on the principle described above, can be also subject to taxation in the country of the licence fee payer, depending on the relevant double-taxation treaty and national tax legislation of the payer. The franchisor may avoid double taxation by setting off the tax paid (withheld) in the foreign country against its tax liability in the Czech Republic.

Besides corporate income tax and withholding tax, general value added tax (VAT) rules apply to franchise business. As a member of the EU, the Czech Republic adopted the EU common system of VAT. VAT applies to most goods and services sold for use or consumption in the Czech Republic regardless of their origin (i.e., VAT applies to imports as well as to goods produced or services provided in the Czech Republic). On the other hand, exported goods or services that are consumed outside the Czech Republic are usually not subject to Czech VAT. In 2017, the standard rate was 21 per cent and there are two reduced rates, of 15 and 10 per cent. Reduced rates apply primarily to essential goods and services such as food, medical supplies or goods for persons with disabilities or children. From December 2016, the 15 per cent reduced rate also applies to catering services, potentially including restaurants and fast food services. This benefit was introduced primarily as compensation for the new obligation to maintain electronic records of sales (called EET), which was recently implemented in the Czech Republic.

ii Franchisee tax liabilities

A Czech franchisee that pays a Czech tax resident for the licence fee has no tax liability, except for VAT, if applicable.

As a rule, licence fees paid to Czech tax non-residents are subject to withholding tax of 15 per cent. Double taxation treaties and EU legislation may reduce the statutory withholding tax rates to 5 to 10 per cent and under certain conditions the licence fees paid to related party recipients in the EU, Switzerland, Norway or Iceland are exempt. The tax is withheld by the Czech franchisee when making a payment to the foreign franchisor but no later than on the day the Czech franchisee must account for this liability. The withheld amount must be transferred to the relevant Czech tax administration office by the end of the month after the month in which the money was withheld.

iii Tax-efficient structures

There is not a generally applicable, one-size-fits-all best practice for tax-efficient franchising in the Czech Republic. It is always a good idea to analyse each particular situation and obtain specific tax advice on any franchising structure before its implementation.

VI IMPACT OF GENERAL LAW

i Good faith and guarantees

It is a general principle of civil law that everybody must act fairly in their legal relationships. Nobody should obtain benefit from the performance of an unfair or illegal act, and nobody should obtain benefit by causing or controlling illegal conditions. In civil law disputes, good faith is presumed, whereas a lack of good faith is subject to a burden of proof. Another related principle is that of good morals (bonos mores) – a legal act (such as a contract) can be null and void if it is in obvious conflict with good morals.

ii Agency distributor model

Under Czech law, a business agent is an independent entrepreneur who undertakes to work towards long-term goals and carries out activities that aim at the conclusion of contracts of a certain kind. The represented person undertakes to pay a commission (agent’s fee). An agency is therefore not a suitable model for franchising. In practice, franchisees typically proceed under their own name and at their own risk, whereas agents act on behalf of a principal and at his or her risk.

iii Employment law

It is highly unlikely, bordering on impossible, that courts would treat franchisees as employees. According to Czech labour law, an employee is a natural person who undertakes to provide dependant work in a basic employment relation. Therefore, relationships between franchisors and franchisees are not treated as employment relations.

iv Consumer protection

Under Czech law, a consumer is defined as any natural person who acts outside the scope of his or her business activities or outside the scope of his or her performance of a profession during the conclusion of an agreement with an entrepreneur (business undertaking). Because franchisees themselves act in their capacity as entrepreneurs or business entities, they cannot be treated as consumers.

v Competition law

In the Czech Republic, competition law is mainly included in (1) the Civil Code, which contains a brief general overview of the topic, rules about unfair competition and non-compete arrangements; and (2) the dedicated Act No. 143/2001 Coll. (the Competition Act). Czech competition law is harmonised with EU law, and the activities and views of the Czech Antitrust Office seem generally to be aligned with those of the European Commission. Obviously, it is always a good idea to review franchise contracts, especially from the perspective of any potential vertical restraints, which may include any exclusivity arrangements, resale price maintenance, product ties, etc., while checking whether an EU block exemption regulation applies. For more information about competition law aspects of franchising see the dedicated chapter of this Law Review, ‘The Competition Law of the European Union’.

vi Restrictive covenants

During the term of the agreement, non-compete and other restrictive covenants can be enforced through the courts. In practice, and depending on the circumstances, the most efficient tool can be a request for a preliminary injunction. The court must decide within seven days of receipt of the request for a preliminary injunction, so it can be rather quick. The downside is that the claimant risks being liable for damages to the counterparty in the event that the main action is not successful.

Needless to say, the enforceability of restrictive covenants is subject to their being in line with the aforementioned competition law regulations. The Civil Code now includes a new concept of ‘forbidden non-compete clause’, according to which non-compete clauses must specify the territory, scope of activity or group of persons to which the restriction applies. A non-compete clause for an indefinite term or for a term longer than five years is forbidden, as is a clause that restricts the other party more than is necessary for adequate protection of the first party. The court may limit such a non-compete clause, revoke it or declare it invalid.

vii Termination

Franchise agreements can be terminated for reasons set out in law or agreed in a contract. Franchise agreements may be typically terminated by mutual consent of the parties or by one of the parties giving notice of termination.

Withdrawal from a contract is possible if it is negotiated by the parties to the contract or on the basis of law. If one party breaches a contract in a substantial manner, the other party can withdraw from the contract without unreasonable delay. Breach of a contractual obligation is substantial if the breaching party knew or should have known that the other party would not have concluded the contract if such a breach had been anticipated.

If a debtor is in default, a creditor can withdraw from a contract on the terms given by the contract or by law. If the default is substantial, one party can withdraw from the contract if it gives withdrawal notice to the other party without unreasonable delay. If the default is not substantial, the party can withdraw from the contract if the other party does not meet its obligation in adequate additional time. The rights to contractual penalties, payment interest, liquidated damages and also all provisions that should remain valid following a withdrawal are not affected by withdrawal from a contract.

The franchisee and franchisor can also terminate a contract if the parties negotiate a cancellation fee. If one party pays the cancellation fee, the agreement is cancelled in the same manner as if the party had withdrawn from the contract.

Revocation of a contract is possible if allowed by law or specifically agreed upon by the parties.

viii Anti-corruption and anti-terrorism regulation

The Criminal Code affects natural persons and their offences, and the Act on Legal Entities’ Criminal Liability sets down offences of legal entities, such as corruption, money laundering or fraud. However, there is not any special regulation applicable to franchise agreements. The Czech Republic is also a member of various anti-terrorism and anti-corruption international treaties and agreements.

ix Dispute resolution

Disputes can be settled in courts or through arbitration. Franchise agreements typically include a dispute resolution clause that points either to a court or to arbitration. In the Czech Republic arbitration is regulated by Act No. 216/1994 Coll. This Act is applicable to all relations, without regard to their character. Disputes before courts are governed by the Civil Procedure Code (No. 99/1963 Coll.). Another supportive procedure was introduced under the Mediation Act (No. 202/2012 Coll.); if it is useful and suitable, the court can order the parties in dispute to attend meetings with a mediator for at least three hours and can interrupt the proceedings (for a maximum of three months). Nevertheless mediation is still not used very often, especially not for commercial disputes.

There is no specific procedure or industry practice for franchising disputes; we are not aware of any of the existing franchising associations in the Czech Republic offering mediation or arbitration services.

Ordinary court proceedings, including first and second instances, may last for several years, depending on the difficulty of the particular case, whereas arbitration proceedings are usually shorter.

Local courts recognise a foreign choice of law. Czech judges are obligated ex officio in matters that have international elements to follow conflict of law rules, and cases may use foreign law. Local courts also recognise jurisdiction clauses.

According to the Civil Procedure Code there is an option to obtain a preliminary injunction if it is necessary to arrange rights and obligations between participants to the proceedings. Jurisdiction is the same as in the main action. A security deposit of 50,000 Czech crowns must be paid by the applicant for such a measure to cover any potential damages.

Costs of litigation are allocated according to the principle of success in the dispute and costs are not capped according to law, but court fees are capped and the costs of representation are limited by secondary legislation, so it is usually impossible to obtain meaningful recovery of legal costs.

Enforcement of judgments and awards follows the common rules of enforcement under Czech law. Czech courts readily recognise foreign arbitral awards from other countries that are party to the New York Convention.

VII CURRENT DEVELOPMENTS

In the recent past, we have seen a lot of activity in the area of franchising. The Czech franchise market is approaching maturity. The annual increment of new concepts and outlets is lower than in the market’s development phase and customers are more demanding and prefer original concepts. Among the franchises with the highest increase in the number of outlets in 2015 were Exteria (work-safety training services), Orion (household retail chain) and ERA Reality (real estate agency). Besides some well-established food and beverages franchises, the new popular areas seem to be lifestyle, fitness and education (e.g., Naturhouse (diet consultancy centre), UGO (juice bar) and BodyBody (fitness centre)). Franchisees tend to seek lower entry fees and a higher return of investment rather than the costly licences and know-how of the world’s most famous franchises. That said, market expansion strategies remain significant, both inbound and outbound, with foreign brands and franchise systems still eyeing the Czech Republic and considering entry, while some Czech franchisors have been successful in going to other countries (or are at least planning such expansion) – particularly to the bordering countries in the CEE region but also beyond. Local franchisors had a market share of 57 per cent in 2014. Among the most popular foreign franchisors are brands from the United States, and also from Germany or Poland.

From a purely legal perspective, there have been no significant shake-ups attributable to the adoption of the new Civil Code in 2014. While professional practitioners are still eager for judicial interpretation of some parts of this new Code by civil courts, so far the transition has happened smoothly without any substantial increase of risks for franchise businesses.

Footnotes

1 Vojtěch Chloupek is a partner at Bird & Bird s.r.o. advokátní kancelář.

2 Franchising Report Czech Republic 2014. PROFIT system. Prague 2014.